The industry’s Big 3 — Nintendo, Sony, and Microsoft — recently joined forces to issue a formal rebuttal to the Trump administration’s proposed schedule of tariffs on goods manufactured in China.
Specifically, the form requested that HTSUS subheading 9504.50.00, which directly covers video game consoles, be removed from the final list of proposed tariffs.
The request was signed by Linda Norman, Microsoft’s Vice President and Deputy General Counsel; Devon Pritchard, Nintendo of America’s General Counsel and Executive Vice President of Business Affairs; and Jennifer Liu, Sony Interactive Entertainment’s General Counsel and Senior Vice President of Business and Legal Affairs.
It’s an unprecedented move in response to an equally unprecedented 25% tariff that could go into effect, and according to the grievance, it would result in upwards of $840 million in additional costs passed on to consumers.
As Norman, Pritchard, and Liu say in the public document, retailers like Best Buy and Walmart sell consoles at very tight margins to begin with, and the only way for those companies to actually make a profit off of those sales is to pass to the consumer the extra cost via a price increase.
Nothing exists in a vacuum, and economics is no exception. The rebuttal contends that not only would these increases harm the consumer and retailers — and during the holiday season to boot — but they would drastically impact the games industry in general.
Fewer sales, especially during the most profitable times of the year, means companies would eventually have to cut back on expenditures.
The document asserts that “console game development is already a highly competitive space” and that the proposed tariffs could mean potential layoffs. The Big 3 executives make a point to note that their companies employ roughly 8,000 people, running a gamut of roles important to any economy, from creative to programming and engineering fields.
Combined with other mid- and small-sized development teams across the country, there are more than 65,000 people employed in the U.S. games industry; that does not take into account the millions more employed by companies making accessories or related goods.
Another consequence Norman, Pritchard, and Liu predict from the tariffs, should they be imposed, is a decrease in important research that goes beyond the games industry. They say Nintendo, Sony, and Microsoft all contribute extensively to research that ultimately benefits a variety of areas, from healthcare to software development in general.
In other words, these tariffs would do the exact opposite of their intent behind them:
While we appreciate the Administration’s efforts to protect U.S. intellectual property and preserve U.S. high-tech leadership, the disproportionate harm caused by these tariffs to U.S. consumers and businesses will undermine — not advance — these goals